Stablecoins, a type of crypto assets that maintain (or purport to maintain) a stable value to fiat currencies, are facing increasing regulatory scrutiny in European Union (EU) while attracting strong institutional interests in other jurisdictions including the United States and Hong Kong. The Financial Times report that there are about US$210bn of stablecoins issued globally, with about US$142bn minted by El Salvador-based Tether and US$57bn by the US’s Circle, branded as USDT and USDC respectively.
It is reported that some of the worlds' largest banks and fintech companies are currently "rushing to launch their own stablecoins", with an aim to leverage these crypto assets to gain a greater share of the cross-border payments market. Notable players such as Bank of America announced last month that it would likely launch its own stablecoin. Other established payments businesses including PayPal, Standard Chartered, Revolut and Stripe also have plans to issue their own stablecoins or expand their current stablecoin offerings, challenging a business so far dominated by Tether and Circle.
For example, PayPal - which has already issued a stablecoin named PYUSD, said it is expanding this offering as a payment option more widely in 2025, and expects it to be adopted widely by US businesses paying overseas suppliers.
The CEO of "Buy now, pay later" giant Klarna - which is working on an US IPO - has also announced on social media platform X that:
Ok. I give up. Klarna and me will embrace crypto! More to come... Last large fintech in the world to embrace it. Someone had to be last. And that's a milestone as well of some sort.
Meanwhile, as the EU's Market in Crypto Assets regulation (MiCA) comes into effect, scrutiny on unregulated offerings is increasing: Tether announced they are discontinuing their EUR denominated stablecoin, with users to exit by 27 November 2025, meanwhile a number of exchanges have delisted USDT and Coinbase terminated rewards for EU users holding USDC.
In Hong Kong, Standard Chartered announced last month that it will form a joint venture to issue Hong Kong's first regulated HKD-backed stablecoin. This initiative marks a significant step in Hong Kong's ambition to cement its place as Asia's crypto hub, and as a global leader in regulated cryptocurrencies. The joint venture will apply for a license from the Hong Kong Monetary Authority under their new regulatory framework for stablecoin issuers. A bill issued in December is currently under review by the Legislative Council to establish the framework. The collaboration brings together three key players from Hong Kong's banking, Web3, and telecommunications sectors, each contributing their expertise to the project. It also coincide with the release of Hong Kong's comprehensive ASPIRE roadmap for crypto regulations.
Corporate giants appear to be embracing a new gold rush as they eye Tether and Circle’s impressive returns from their holdings of reserves. However, upcoming regulations (such as EU's MiCA) look set to impose more stringent (and costly) compliance requirements, which may cause some of these stablecoin promises to burst. Myths around stable coins are still many, with a great debunking by Jai Massari and Alex Barrage:
Myth | Fact |
Myth 1: Stablecoins are like deposits, and their issuance is inherently riskier than bank deposit taking. | Well-regulated stablecoins with full reserve requirements are not inherently riskier than traditional banking. Unlike fractional reserve banking, stablecoins must be fully backed by high-quality liquid assets (HQLA), with transparent attestations and tailored capital buffers. |
Myth 2: Stablecoins will displace bank deposits and disrupt money creation. | Stablecoins will complement, not displace deposits. They're more expensive for banks to issue than traditional deposits (HQLA vs higher-yield investments) and more expensive for users to hold than interest-bearing accounts, making them suitable primarily for transactional needs. |
Myth 3: Stablecoin issuer failures require specialized FDIC resolution; bankruptcy process is unworkable. | With proper modifications to the Bankruptcy Code, bankruptcy can provide better consumer protection than FDIC resolution for non-bank issuers. Key improvements would include segregating reserves from the bankruptcy estate, preventing clawbacks, and enabling expedited holder payments. |
Our summary of Jai and Alex's great article
Demand for dollars particularly in emerging markets and for cross-border payments means stablecoins are increasingly finding product market fit. While the role of stablecoins in the global financial system remains to be seen, one thing is for sure - stablecoins are getting the corporate and fintech world excited.
Written by Steven Pettigrove and Jake Huang and Michael Bacina
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